Investment advisers to come under Sebi regulations

Aug 17, 2012 |

mumbai

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Market regulator Sebi on Thursday said any entity offering investment advice for a fee would have to come under its regulatory net, although those giving free advice would not be covered under the new rules.

Announcing regulations for investment advisers, Sebi Chairman U K Sinha also said those providing investment advice without any monetary consideration through media and other publicly available means would not be considered as 'investment advisers' for regulatory purposes.

The Sebi approved the Investment Advisers Regulations at its board meeting held here. "The philosophy behind this is that if anybody is providing advise for a fee, they would be regulated. If somebody is not providing for a fee, they will not be regulated," Sinha told reporters.

Banks or corporate bodies would be required to offer investment advisory services through a subsidiary or a Separately Identifiable Department or Division (SIDD). Such a SIDD would have to be clearly segregated from other activities.

"The Investment Advisers Regulations have been framed based on consultation with RBI, IRDA, PFRDA and comments received from the public on the concept paper," Sebi said in a statement.

"All individuals, body corporate and partnership firms engaged in the business of providing investment advice to investors for consideration are required to be registered and regulated under these regulations," the market regulator said. Also, any person who holds himself as an investment adviser would be regulated, it added. Financial planners would have to registered as investment advisers.

"Only the act of giving advice will be regulated under this regulation, whereas the regulation of selling of products, if any, would be solely under the purview of the product regulators," Sebi said.

Further, an investment adviser should not be getting any remuneration or compensation from any person other than the client being advised.

Almost a year ago, Sebi had floated a paper on regulating investment advisers and the same had received good response. "Requirements relating to experience, qualification, certification and net worth/ net assets have been prescribed for a person to act as an investment adviser," the statement said.

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